2025 Capital Markets Outlook: 3 Trends Fueling a Resurgence

Capital markets activity, for mergers and acquisitions as well as capital expenditures spending, is poised for a resurgence in 2025. The current economic backdrop—lower interest rates, subdued inflation and modest but positive GDP growth—has set the stage for a rebound in strategic investments and capital raising across debt and equity.

Capital markets are emerging from a slowdown after the COVID pandemic, when corporations and private equity firms lacked confidence to transact while they grappled with high interest rates and inflation, supply-chain disruptions and geopolitical uncertainty. “There was too much volatility in markets for clients to have the confidence to pursue strategic opportunities,” says Evan Damast, Co-Head of Global Capital Markets at Morgan Stanley. “Now, more favorable economic conditions have led to an influx of cash into all asset classes. There have not been enough new events, such as M&A and leveraged buyouts, to satisfy demand. But in 2025, that will change, and there will be a lot more activity for a robust year.”

In 2025, companies and investors can monitor the following trends that are set to contribute most to a pickup in capital markets activity:

• A rebound in strategic M&A, financed through debt and/or equity
• Issuer and investor demand for private credit
• Capital spending on infrastructure for artificial intelligence and its energy needs
• Unprecedented pent-up investor demand for private and public opportunities

1. M&A Rebound Fueled by Capital Markets Strength

In 2025, strategic deals and private equity M&A are poised for growth. As inflation and interest rates have moderated, companies are gaining more appetite to finance strategic events through debt and equity capital markets. “The consistent availability of debt financing is critical for M&A transactions to come to fruition,” says Anish Shah, Global Head of Debt Capital Markets at Morgan Stanley. 

Several notable transactions within the last year help illustrate the beginnings of a fulsome rebound in M&A activity, boosted by capital markets financing. Morgan Stanley facilitated the following deals:

• Global insurance brokerage Arthur J. Gallagher’s acquisition of U.S. insurance broker AssuredPartners for $13.45 billion in December 2024¹: Morgan Stanley underwrote bridge financing, equity financing and investment grade debt financing. “It was the perfect moment for the seller to monetize at an attractive valuation, and the buyer did something bold—a large cash acquisition, financed with debt and equity. That gives you a sense of where the market is headed: more bold strategic activity,” Damast says.

• Public equipment leasing company United Rentals’ acquisition of H&E Equipment Services for $4.8 billion in January 2025²: Morgan Stanley provided $3.8 billion in committed bridge acquisition financing for United Rentals.

• Private-equity firm Advent International’s $1.5 billion leveraged buyout of Sauer Brands from private-equity firm Falfurrias Capital Partners in January 2025³: Morgan Stanley advised Sauer Brands and arranged debt financing to facilitate Advent International’s acquisition.

2. Private Credit in Demand from Borrowers and Investors

In 2025, issuers and investors will likely continue to drive private credit’s growth. Compared to public syndicated loans, private credit is attractive to some borrowers for its tailored and more flexible structures and to investors for enhanced returns, diversification and the ability to deploy capital in scale. Private credit assets under management may reach $2.8 trillion by 2028, which would double 2022’s asset level, according to Preqin.⁴

Morgan Stanley helps companies choose the right market based on their borrowing needs and investor interest. “We spot situations and quickly identify whether the public/syndicated or private markets will offer the best execution for our clients,” Shah says.

Some issuers have been raising debt in private markets to help refinance their existing loans. In October 2024, Morgan Stanley helped Canadian gaming company Gateway Casinos & Entertainment raise $1.3 billion of private debt to refinance its loans and issue a dividend to shareholders. In March 2024, Morgan Stanley also helped Rockefeller Capital Management raise $850 million of debt in private markets to refinance its loans.

3. Wave of Capital Spending on AI and Energy

As enterprise and consumer demand for artificial intelligence (AI) continues to grow, companies need to raise capital to invest in data centers and energy infrastructure. Capital markets will play a crucial role in facilitating these developments, through solutions that include private credit and tax equity, in which investors provide capital to a project in exchange for its tax benefits.

Companies are using tax equity as a source of funding for U.S. projects in sectors such as renewable energy, which can receive tax credits from the U.S. government for advancing environmental objectives. In July 2024, Morgan Stanley served as sole lead provider of tax equity for Intersect Power’s $837 million in financing that included construction debt, tax equity and term debt financing to build battery energy storage systems in Texas.⁵

Among private credit issuances in the energy space, Morgan Stanley worked with Tennessee Valley Authority in October 2024 to raise $720 million of financing through secured Holdco notes (which offer collateral protection to lenders) to help finance a new facility with natural gas-driven combustion turbine generators. “Deals like these highlight the capital needs for the significant growth in power demand,” Shah says.